Afghan economy stumbles amid election uncertainty

For Afghanistan's business community, the troubled election has been one more economic hit in a difficult year that's included rising threats from kidnappers and the Taliban-led insurgency. As security costs soar and consumer sales soften, some Afghan business people have abandoned homes in Kabul for safer places such as Dubai. Others have pulled back on investments.

As the economy has slowed in the aftermath of election, business has slumped for Kabul's money exchangers, who turn Afghanis into dollars and other foreign currency for businessmen
Hal Bernton/Seattle Times/MCT

KABUL, Afghanistan -- Gulbuddian Arabzada has a small factory that turns scrap aluminum into shiny new pans that Afghan families use for washing clothes, making bread and other tasks.

His products are hardly luxury items, yet amid all the uncertainty surrounding this country's presidential election, even these pans are a hard sell. Since the Aug. 20 vote, Arabzada has slashed his daily production in half and laid off 15 of his 50 workers

"There is a kind of fear among the people, and the shop owners who sell my product, they tell me, 'Brother, the situation is bad,'" Arabzada said.

For Afghanistan's business community, the troubled election has been one more economic hit in a difficult year that's included rising threats from kidnappers and the Taliban-led insurgency. As security costs soar and consumer sales soften, some Afghan business people have abandoned homes in Kabul for safer places such as Dubai. Others have pulled back on investments.

Afghan government and business officials say the economic downturn has spread across a broad swath of the economy. Real estate sales have dipped and money exchangers say less business people are seeking foreign currency to bankroll deals. A slowdown in the demand for electronics, automobiles and other products caused an 11 percent decline in Afghanistan's import tax revenues in the three months that ended in August compared to the three-month period that ended in May, according to the Ministry of Finance.

Business people also complain that President Hamid Karzai is now in a weakened position to crack down on the bribes often sought by police and other government officials as goods move across Afghanistan. That's further complicated commerce.

"We have complained and talked about this issue, and President Karzai said it should stop," said Muhammad Qurban, the chief executive of Afghanistan's Chamber of Commerce and Industries. "But still we are facing this because the government somehow loses its power and control in the rural areas. This is one of the negative impacts of the election."

The Obama administration had hoped that the Aug. 20 vote would help strengthen Afghan democracy in the aftermath of decades of coups and the Taliban's violent ascent to power.

In the weeks that followed the election, however, evidence of widespread fraud prompted a lengthy review process by a United Nations-backed complaints commission. The vote rigging helped stir debate in America about the future of U.S. policy in Afghanistan, and in Kabul and elsewhere in this country it created a sense of political drift amid an expanding threat from the Taliban insurgency.

In an initial tally announced in September, Karzai claimed more than 54 percent of the vote, while his closest challenger, former foreign minister Abdullah Abdullah, received less than 28 percent. But final results soon to be released are likely to exclude enough questionable votes to push Karzai's to 50 percent or less of the vote, according to an official, speaking on the condition of anonymity, at the Afghanistan Independent Election Commission. That could set the stage for a run-off election or for negotiations on a national unity government.

Afghan law requires that the runoff be held within two weeks of the final vote announcement, and that would be a difficult challenge. Some mountain areas already are cut off by cold weather. Also, Taliban forces are expected to try to disrupt this election just like they did the last.

"This is an American process, and mainly the election has taken place in Washington," said Zabiullah Mujahid, who speaks to reporters on behalf of the Taliban. "We, Taliban, intruded in the past, and we will intrude again so the election won't succeed."

There also is talk in Kabul that Abdullah could opt to withdraw from the race in exchange for political concessions from Karzai.

Karzai became Afghanistan's interim president in 2002, and then won election to a first five-year term in 2004. His administration has drawn billions of dollars in Western aid as the U.S. and European nations attempted to bolster the post-Taliban government, and all that money helped create an economic boom in Kabul.

Many expatriate Afghans initially returned with their families, and initial capital investments by 2006 had climbed to more than $1 billion as cell phone companies and other businesses found profit opportunities here, according to the Afghanistan Investment Support Agency.

The biggest business that's flourished in recent years has been the heroin trade, however, and the resurgent Taliban, a rising threat from criminal gangs and government corruption all have helped dull the enthusiasm of investors in manufacturing and other businesses not closely tied to Western military and aid spending.

"Kidnapping of businessmen became an industry, and the government seemed not to care," said an Afghan businessman involved in food imports and trading.

This businessman, who requested anonymity because of security concerns, said he'd left Afghanistan at 14, and returned to rebuild his family home after the Taliban fell. He never moved his wife and children back to Kabul, though, and now he visits only occasionally.

"The security situation has become so bad that I feel I should run my business sitting in Dubai. I cannot afford the expenses of having security guards and armored vehicles . . . I am deeply worried that election issues could further destabilize our country."

The 28-year-old Arabzada, the operator of the plant that makes aluminum pans, said it was easier to operate his business back in the Taliban days. Then, he didn't face criminal gangs or so many government officials asking for bribes.

Despite these challenges, Arabzada said his business had still managed to prosper under the Karzai administration. In a central courtyard, trucks unload battered pots, old gutters and other items. All this aluminum is melted down and then reshaped to form new pans and other items each day by workers who make between $80 and $300 a month.

In the weeks before the election, sales slipped as the Taliban stepped up attacks. They slumped even more sharply in the weeks that followed the vote, as there was no clear winner.

Arabzada is hoping that business will rebound if a new president is finally elected. He doesn't have much hope for improvements in security, however. Each day, Arabzada drives to work in an unarmored car, hoping to keep a low profile and steer clear of kidnappers and insurgent bombs.

"We put our trust in God," Arabzada said.

(Bernton reports for The Seattle Times. Shukoor is a McClatchy special correspondent.)